A firm has determined its optimal structure which is composed of the following sources and target market value proportions.ModifyingAbove and below Start 2 By 1 Matrix 1st Row 1st Column Bold Start 2 By 1 Matrix 1st Row 1st Column Target Market 2nd Row 1st Column Source of Capital Proportions EndMatrix 2nd Row 1st Column Start 2 By 1 Matrix 1st Row 1st Column Long minus term debt 60 % 2nd Row 1st Column Common stock equity 40 EndMatrix EndMatrix with brackets

TargetMarket

SourceofCapitalProportions

Longtermdebt60%

Commonstockequity40

Debt: The firm can sell a

15minusyear,

$1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of $50.Common Stock: A firm's common stock is currently selling for $75 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.10. It is expected that to sell, a new common stock issue must be underpriced $2 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm has a marginal tax rate of 40 percent.The firm's cost of a new issue of common stock is ________. (See Table 9.